Fifty years ago, the typical entrepreneur was relatively
homogenous and static. He was usually a white man, sometimes
working together with his family, who owned a small Main Street
retail shop or a local manufacturing company. He knew most of his
clients, and his company focused on local goods and services.

Today, much has changed. America's entrepreneurs are much
more diverse racially, gender-wise and age-wise, and an increasing
number are starting service businesses rather than manufacturing or
retail companies. Economists, sociologists and small-business
experts say the key trends in American entrepreneurship-growing
diversity, an aging work force, a preference for starting companies
that fit personal lifestyles, and a move into higher-value, global
industries-are only likely to accelerate in the coming years. A
decade from now, they say, the entrepreneur of the future will be
drastically different from even today's business owners.

The New Face of
Entrepreneurship
Perhaps the biggest change we'll see in the entrepreneur of the
future is that 2010's business owner is more likely to be a
woman or a minority. According to the Center for Women's
Business Research, the number of privately held women-owned
businesses in America grew by roughly 11 percent between 1997 and
2002, while privately held businesses as a whole grew only 6
percent. Similarly, the Center for Women's Business Research
found that more than half of Asian-American and African-American
women small-business owners say their firms have grown over the
past three years, a significant feat in a down economy. Indeed,
Joel Marks, executive director of the American Small Business
Alliance, an industry trade group, notes that the number of
minorities and women participating in his organization has grown
sharply in recent years.

Several factors may explain why more women and minorities are
starting companies. Most obviously, the percentage of women and
minorities in the U.S. work force is growing as more women work and
immigration increases the population of minorities, so their
participation in business ownership is naturally rising as well.
"Entrepreneurship is still living the American Dream" and
thus appeals to recent immigrants, adds Marks.

But more complex factors also come into play. As an earlier
generation of minorities began to go into entrepreneurship in the
1970s and '80s, they provided critical role models like Magic
Johnson and Oprah Winfrey, who have sparked many more, younger
minorities to consider starting their own companies. "There
are more minority role models in entrepreneurship [today, so]
entrepreneurship is increasingly seen by minorities as an
acceptable way to go," says William Bradford, an expert on
minority-owned small businesses at the University of Washington,
Seattle.

Women and minority entrepreneurs are not only becoming more
visible, but they're also becoming more vocal. As these
entrepreneurs become more established members of the small- and
midsize business community, says Marks, they "want to take on
issues beyond the day-to-day [concerns]"-issues such as
health-care reform, for example. Marks says more women and
minorities now take part in lobbying in Washington or in their
state capitals, pushing state governments and the federal
government to address entrepreneurs' concerns.

One big concern is access to capital for minorities, who still
find it hard to obtain traditional sources of funding, such as bank
financing, SBA loans and venture capital. "The main thrust of
the VC industry is still dominated by high tech, and there are
fewer minority IT firms," Bradford says. But, he adds,
minority small businesses are getting more adept at tapping
alternative capital networks, such as debt financing and VC firms
that focus on minority companies. In the long run, Bradford says,
these alternative capital networks will provide minority
entrepreneurs with more tools to raise capital. And their future
success may convince the mainstream financing industry to invest
more heavily in minority firms.

As minority entrepreneurs fight to stand on equal footing with
non-
minority entrepreneurs, women struggle to catch up in a still
predominantly male arena. America's population of entrepreneurs
consists of 1.6 men for every 1 woman, says Heidi Neck, an
assistant professor of entrepreneurship at Babson College in
Wellesley, Massachusetts. She believes this is partly because
universities don't offer classes targeting women who are
interested in entrepreneurship.

It's clear women and minorities still have considerable
ground to make up. But as their numbers increase, the demographics
will force the business community to reassess its biases.

Profiting From Experience

Not only is the U.S. work force becoming more diverse, but it is
also aging, as baby boomers reach their 50s, 60s and 70s. As a
result, experts say, the entrepreneur of the future is likely to be
older, more attuned to the older population's needs, and more
willing to trade some income for a better lifestyle. An SBA study
released in 2000, "The Third Millennium: Small Business and
Entrepreneurship in the 21st Century," notes that the average
age of a worker will increase from 35.9 years in 1988 to 40.7 years
in 2008. What's more, corporate downsizing over the past 20
years pushed many midcareer workers out of corporate jobs,
enlarging the pool of older potential entrepreneurs. The SBA
believes that, between 1996 and 2006, the number of self-employed
workers will grow by 50 percent, in part because of these older
entrepreneurs. This growth probably will occur no matter whether
the American economy as a whole tanks or soars.

Because many of these older entrepreneurs come from the
corporate ladder, they may not be willing to start businesses that
force them to work like maniacs in occupations they don't love.
Mark Henricks, author of Not Just a Living: The Complete Guide to
Creating a Business That Gives You a Life and
Entrepreneur contributing writer, calls these people who
shun overwork and prefer jobs that suit their lives "lifestyle
entrepreneurs." These are men and women for whom enjoying
their personal life is as important as making a lot of money, and
who set up companies in places they like, in ways that facilitate
family time and in industries they enjoy. "The percentage of
lifestyle entrepreneurs will go up [as the population ages because]
your typical lifestyle entrepreneur is someone in midlife who is
burned out, has skills and resources, and wants to do something
more rewarding," Henricks says.

Indeed, Jane Pollak, author of Soul Proprietor: 101 Lessons From a Lifestyle
Entrepreneur, says, "I'm part of the graying baby
boomer generation. We don't want to play cards [in retirement].
We're saying, 'What can we do?'" More and more
boomers are finding the answer in lifestyle businesses, Pollak
says.

Nancy Peklo-Nosal, who left a travel agency she was working for
to start her own business, providing administrative services to
other travel companies, is a member of this lifestyle entrepreneur
group. She says a major factor in her decision to start her
company, Design Travel Management Group Inc. in Arlington Heights,
Illinois, was "wanting to work from home. I'm more free to
make my own schedule."

Pollak also believes the recent ethics problems in large
corporations have turned people away from big business, driving
them into lifestyle entrepreneurship. Indeed, in the future,
lifestyle entrepreneurs may be more likely to create socially
conscious companies-ones that pay higher wages or devote resources
to community activism, for example-because they focus less on
maximizing income and more on other goals. And because many
lifestyle entrepreneurs are in their middle or older years, they
may be more attuned to aging customers' needs. "We'll
see more and more entrepreneurs adapting to an aging
population," Marks says. For example, he believes more small
businesses will offer flextime not only for parents of small
children, but also for sons and daughters of elderly parents who
need more care.

Technology and the revolution in business supplies will help
facilitate lifestyle entrepreneurship in the coming years. Brett
Schulte, 36, is a former dotcom worker who went on vacation to
Mexico's Baja California and loved the area so much, he moved
his family there. In the Baja, Schulte has set up shop as a Web
consultant for local resorts. Speaking with Entrepreneur from a
remote beach on a radio phone powered by solar energy, he says:
"Technology is making geography less important. [VoIP] is
enabling me to have a U.S. phone number in Mexico." So clients
can call him in the United States and never know he's working
from his laptop on a Mexican beach. What's more, because Home
Depot and Staples now carry products for roughly the same prices as
suppliers to large companies, small lifestyle entrepreneurs can
source their supplies at the same low costs as big firms.

Second Chances

By the time he founded his logistics company, Tommy Hodinh had
already succeeded in life-just by staying alive. A Vietnamese
refugee who arrived in the United States in 1972 at age 18 with
limited English skills, Hodinh managed to put himself through
college. He then worked for IBM for 15 years, first as an engineer
and later as a member of the management team. But the whole time he
worked for Big Blue, he knew he wanted something else. "I
always wished I had the money to start a company. I had experience,
but I didn't have the capital," Hodinh says.

By the 1990s, the barriers to starting a small technology
company had dropped considerably. "It didn't cost that
much to start a business [anymore]," Hodinh says. "A
small office cost a couple hundred dollars [per] month; you could
get incorporated for a few thousand dollars. I could start a
business with my own savings." In 1990, he co-founded
MagRabbit Inc., a software duplication and logistics firm in
Austin, Texas. Growth was slow and steady, but six years later, the
company was big enough to get a commercial bank loan; now it has
more than 100 employees, nearly $10 million in annual sales and
clients around the world.

Hodinh has proved to be an example to many other Asian Americans
in Texas. "I was the only Vietnamese American in the software
business [in Austin] when I started out," Hodinh says.
"But now, the Vietnamese- American business community is much
larger. I came here when I was 18, and my English wasn't good,
but the [Vietnamese Americans] who were born here, they're
well-equipped to compete in business."

Here to Serve

Few of these future lifestyle entrepreneurs will start companies
in manufacturing or even retail, sectors of the small-business
community that are in precipitous decline. Manufacturing alone has
lost nearly 3 million jobs over the past five years, and small
manufacturers have been particularly hard hit, as they have been
unable to compete with low wages overseas. According to a 2000
study by the SBA, by 2010, "the relative shares of employment
in the manufacturing and service sectors are expected to be just
about opposite of the 1950 levels"; and by 2015, roughly 35
percent of American businesses will be in services. The most recent
survey from the Global Entrepreneurship Monitor, a research
program-funded by the Ewing Marion Kauffman Foundation and
conducted by Babson College-that assesses the national level of
entrepreneurship, says that over the next five years, the most
highly educated entrepreneurs, who more often start IT or service
businesses, will have the most employees.

As entrepreneurs of the future increasingly move into
higher-value service businesses, they will also have to attain
higher levels of education and interact more with foreign suppliers
and customers to succeed. Howard Aldrich, a professor of sociology
at the University of North Carolina, Chapel Hill, who has studied
entrepreneurship, says that today, education is the key predictor
of business formation-people with more education are more likely to
start a business. What's more, for a service business to
compete in an increasingly global marketplace, future
entrepreneurs-in IT, biotechnology, customer service, consulting
and other fields-will have to outsource, sell and purchase abroad.
The Department of Commerce estimates the number of small companies
that export tripled between 1987 and 1997, and small-business
experts expect the trend to continue.

Looking to the Future Though the entrepreneur of the future may
be more racially diverse, older, devoted to personal and family
time, more globally focused, better-educated and more concentrated
on services, he or she will still need some core traits to succeed.
Alex De Noble, a professor of entrepreneurship at San Diego State
University, says, "You need to have certain principles of
personality" to succeed in small business at any time.

Indeed, by studying entrepreneurs in a range of locales, De
Noble and several colleagues have concluded that successful
entrepreneurship requires a certain amount of neuroticism,
extro-version, conscientiousness, agreeableness and openness.
Neuroticism, De Noble says, leads entrepreneurs to focus on
details, while conscientiousness helps them plan. Agreeableness
allows them to build external networks crucial for a new company to
prosper, extroversion facilitates this network-building, and
openness to new ideas is crucial for taking the leap into business
ventures. Indeed, De Noble says, 10 or 20 years from now, we will
still recognize the characteristics of successful entrepreneurs:
Despite the changes in the external business environment,
"running a business is still running a business."

Seeing Green

Trisha Anderson was a pioneer. In 1999, in her late 40s, she
decided she'd had enough of the corporate life and wanted to
try entrepreneurship-in an area that fit her lifestyle. "The
life I was living, swept up in the rat race, was making me
sick-physically and spiritually," Anderson notes. So she
founded mybackyard.com, a Web site that provides information on
organic foods, eco-friendly gardening and other environmental
topics and also sells products related to these topics.

There was only one drawback: "There weren't older
entrepreneurs around, and I felt very different," Anderson
says. Regardless, she got her company off the ground, advertising
it through link exchanges and word-of-mouth. By 2003, her homebased
mybackyard.com had roughly 50,000 unique visitors each month, and
Anderson had two employees working for her.

Even better, as the number of older entrepreneurs in America has
skyrocketed, Anderson no longer feels so alone. "In the
current economic environment, many ex-employees start
companies," she says. Anderson credits the trade group Forum
for Women Entrepreneurs (FWE) for putting her in contact with other
people in her situation. "The FWE seemed to be
age-blind," she says.

Today, Anderson has few regrets about her decision. "I have
never wanted to go back to my old job," she says. "I
didn't anticipate how totally life-consuming [entrepreneurship]
would be, or how much stuff you have to do yourself when you start
a business. But it has given me the confidence I need."

Anderson has been an inspiration to other older entrepreneurs as
well: "My husband and his colleague are about to launch [their
own] product."